GST: New rules will have impact on retail chains, restaurants and contractual farming

GST: New rules will have impact on retail chains, restaurants and contractual farming

By Registrationwala

22nd February 2017

The new Goods and Service Tax bill has left no stone unturned. The reformations proposed by this bill not only promises economic progress but is also framed to benefit all citizens at large. India is a country where the Agriculture sector contributes largely to the overall GDP. About 16% of Indian GDP is contributed by the agricultural sector.

The latest sector hit by the GST bill is the big retail chains and QSR’s running across the country. Quick service restaurants and big retail chain will be facing an issue with government’s decision to buy affect a few parts of agriculture under the GST bill.

Contractual farming which was earlier initiated in order to facilitate participation of private sector in contributing to the agriculture sector of India through contracts leading to capital inflow is now subjected to scrutiny. This method of commitment driven farming has proven to be a success in the past and has encouraged many MNC’s to invest in Indian agricultural sector.

Contractual farming is now included as an area that will be addressed by the new bill.

As per The Government of India's National Agriculture Policy, it encouraged many big retail chain and Quick service restaurants to give contract to farmers for the growth and supply of a certain agricultural product that’s been used in abundance in their business. These products procured from the framers were eventually sold in the mall at a higher margin.

It is speculated that contractual farming will be brought under the GST radar.

Apart from agricultural products being sold by retail chains; QSR’s will also be impacted by this change as many Burger chain giants that give contracts for potato farming will attract GST hereafter.

It’s not just the top of the hierarchy that is going to undergo this change; middle men trading in agricultural products will also be subjected to this change. Smaller retail business holders trading with agricultural products apart from other products will also not be spared.

The unaffected remains the farmer, who will not have to pay for GST. Traditional farmers will be exempted from paying and will continue to reap the benefits of contractual farming.

This speculation has raised many eye brows and government has been taking measures to iron out the differences in its best capacity before executing this new centralised tax system.

Sectors of banking and other financial institution are also finding it difficult to deal with the complexity of the new claimed tax system.

The spark of dispute in interest has already been set by the financial institutions and banks by raising questions on the tax levied on transaction between braches of a same bank. The proposal of this new tax could prove to be a task for the banks and has lead the banks appealing to the centre for a change in the drafted policy.

Government is taking these appeals into consideration and is trying to resolve issues by addressing important agendas before rolling out the new bill.

For more information about GST in India visit gst.registrationwala.com